S&P Keeps Buy on Apple

Plus: Equity Lifestyle Properties gets downgraded to hold, and more

Apple Computer (AAPL): Reiterates 4 STARS (buy)

Analyst: Richard Stice, CFA

An unconfirmed report in The Financial Times states that stock options granted to Steve Jobs in 2001 were not authorized by the board of directors and that documents pertaining to the compensation were falsified. We find this news troubling, but note that there is no indication that he had knowledge of these events. Moreover, the grants in question were later cancelled. While the ongoing investigation is clearly a distraction, we believe Apple's business prospects remain favorable. In addition, we think the likelihood that Jobs will be forced to leave the company is remote.

Equity Lifestyle Properties (ELS): Cuts to 3 STARS (hold) from 4 STARS (buy)

Analyst: Robert McMillan

Shares of Equity Lifestyle Properties have reached our $53 target price, which we are raising to $58. Although we expect operating trends for HCC Insurance Holdings, Inc. to remain positive, driven by an expanding economy, we think its shares have limited appreciation potential now, and we still see 2006 and 2007 funds from operations at $2.74 and $3.05. Equity Lifestyle Properties is trading near peak historical valuation levels, which we attribute in part to M&A euphoria that has affected the whole group. But we expect valuations to narrow over next 12 months to a more sustainable level. Equity Lifestyle Properties shares are yielding 0.5%.

Fujifilm Holdings (FUJI): Cuts to 2 STARS (sell) from 3 STARS (hold)

Analyst: Erik Kolb

Our downgrade reflects a revision in our growth projections for fiscal year 2007 (ending March) and fiscal year 2008. Although we are raising our 12-month target price by $1 to $39, the price of the ADRs has risen to a level we regard as overvalued. We estimate earnings per ADR of $0.63 and $2.02 for fiscal year 2007 and fiscal year 2008, respectively.

iRobot Corp. (IRBT): Starts at 3 STARS (hold)

Analyst: Thomas Smith, CFA

We believe iRobot has the potential to increase sales of robotic products sharply from a small base. But we also think costs to support rapid growth may be great, creating uncertainty for earnings. Based on our 2007 EPS estimate of $0.35, iRobot shares trade about triple the price-to-earnings of the average small-cap stock. At this valuation level we think the potential for growth is reflected in the share price. Applying a price-to-sales ratio of 2.3 times, near the low end of its historical range, to our 2007 sales estimate of $9.38 a share, we derive our 12-month target price of $22.

Global Payments (GPN): Maintains 4 STARS (buy)

Analyst: Zaineb Bokhari

Ahead of Nov. quarter earnings planned for Jan. 5, we continue to forecast EPS of $0.40 (after option expenses) vs. $0.38. We expect revenues to rise 19% to $261 million. Our fiscal year 2007 (ending May) EPS estimate stays $1.74. But we are raising fiscal year 2008's by $0.05 to $2.00, to reflect our outlook for modestly wider operating margins as Global Payments continues to realize operating efficencies from acquisitions, its joint venture with HSBC, and ongoing maturation of Dolex branch network. We are raising our target price by $4 to $55 based on our DCF model, which assumes 10.5% cost of capital and 4% terminal growth.

Bisys Group (BSG): Reiterates 3 STARS (hold)

Analyst: Dylan Cathers

After further reviewing Bisys Group's recently filed fiscal year 2006 (ending June) 10-K, along with our financial model, we are lowering our fiscal year 2007 EPS estimate by $0.09, to $0.56. This partly reflects a reduction in our revenue growth projection from 4% to 1%, based on slower growth in Bisys Group's investment services segment. We also think operating margins in fiscal year 2007 will be adversely affected by weakness in investment services and elevated levels of corporate expense. However, our 12-month target price remains $13, a peer-based P/E of 21.5 times our calendar 2007 EPS estimate of $0.60.

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